The Federal Board of Revenue (FBR) has granted sales tax exemption on supplies, withholding tax and income tax exemption on individuals, companies and association of persons (AOPs) of erstwhile Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) from June 1, 2018 to June 30, 2023. The FBR has issued SRO 1212(1)/2018 and SRO 1213(1)/2018 here on Friday to grant tax exemptions to the residents of erstwhile FATA/PATA.
Under SRO 1212(1)/2018, prior to commencement of the Constitution (Twenty fifth Amendment) Act, 2018, the Sales Tax Act, 1990 was not in force in the Tribal Areas as defined in Article 246 of the Constitution of the Islamic Republic of Pakistan, hereinafter called as the Constitution, and the levy of sales tax was not attracted to the supply transactions made in the said Tribal Areas.
The Article 247 of the Constitution stood omitted on commencement of the Constitution (Twenty-fifth Amendment) Act, 2018 with effect from the 31st day of May, 2018 and the Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) stood merged in the Provinces of Khyber Pakhtunkhwa and Balochistan under paragraph (d) of Article 246 of the Constitution.
On commencement of the Constitution (Twenty-fifth Amendment) Act, 2018, the Sales Tax Act, 1990 is in force in the said Provinces including the erstwhile Tribal Areas forming part thereof.
The FBR said a phased approach was needed for the full application of fiscal laws to the said erstwhile Tribal Areas, a decision was made to exempt all those supplies and transactions from levy of federal taxes which were not applicable to the said areas by virtue of said Article 247 and accordingly three sales tax Notifications No. SRO 888(I)/2018, No. SRO 889(I)/2018 and No SRO 890(I)/2018, all dated 23rd July, 2018, were issued by the Federal Government granting exemption from sales tax to the supplies specified therein.
The concerns were raised by the trading community of the said erstwhile Tribal Areas to the effect that the three aforesaid Notifications did not restore the position as existed prior to the commencement of the Constitution (Twenty-fifth Amendment) Act, 2018, FBR said.
In order to address the concerns so raised and to restore the position in relation to levy of sales tax to the said erstwhile Tribal Areas, the Federal Government, in exercise of the powers conferred by clause (a) of sub-section (2) of section 13 of the Sales Tax Act, 1990 has ab-initio rescind its Notifications No. SRO 888(1)/2018, SRO 889(I)/2018 and No SRO 890(I)/2018, all dated the 23rd July, 2018.
The FBR has exempted from whole of sales tax, by whatever name called, as levied under the Sales Tax Act, 1990, or notifications issued thereunder, on supplies made till the 30th June 2023, to which the provisions of the said Act of 1990 or the notifications issued thereunder, would have not been applied had Article 247 of the Constitution not been omitted under the Constitution (Twenty-fifth Amendment) Act, 2018.
This Notification shall take effect on and from the date the Constitution (Twenty-fifth Amendment) Act, 2018 received assent of the President.
Under SRO 1213(1)/2018, prior to the Constitution (Twenty-fifth Amendment) Act, 2018, the Income Tax Ordinance, 2001 was not in force in the Tribal Areas as defined in Article 246 of the Constitution of the Islamic Republic of Pakistan, hereinafter called as the Constitution, and the levy of income tax was not attracted to the said Tribal Areas.
On commencement of the Constitution (Twenty-fifth Amendment) Act, 2018, the Income Tax Ordinance, 2001 is in force in the said Provinces including the erstwhile Tribal Areas forming part thereof.
A phased approach was needed for the full application of fiscal laws to the said erstwhile Tribal Areas, a decision was made to exempt all persons from levy of income tax which was not applicable to the said areas by virtue of said Article 247 and accordingly Notification No. SRO 887(1)/2018, dated the 23rd July, 2018, was issued by the Federal Government granting exemption from income tax, FBR said.
The concerns were raised by the trading community of the said erstwhile Tribal Areas to the effect that the aforesaid Notification did not restore the position as existed prior to the commencement of the Constitution (Twenty-fifth Amendment) Act, 2018.
In order to address the concerns so raised and to restore the position in relation to levy of income tax to the said erstwhile Tribal Areas, and in exercise of the powers conferred by sub-section (2) of section 53 of the Income Tax Ordinance, 2001, the Federal Government has amended Second Schedule of the Income Tax Ordinance 2001.
The new clause of the FBR said any income which was not chargeable to tax prior to the commencement of the Constitution (Twenty-fifth Amendment) Act, 2018 of any individual domiciled or company and association of persons resident in the Tribal Areas forming part of the Provinces of Khyber Pakhtunkhwa and Balochistan under paragraph (d) of Article 246 of the Constitution with effect from the 1st day of June, 2018 to the 30th day of June, 2023 (both days inclusive).
The provisions of sections in Division III of Part V of Chapter X and Chapter XII of the Ordinance for deduction or collection of withholding tax which were not applicable prior to commencement of the Constitution (Twenty-fifth Amendment) Act, 2018 shall not apply to individual domiciled or company and association of person resident in the Tribal Areas forming part of the Provinces of Khyber Pakhtunkhwa and Balochistan under paragraph (d) of Article 246 of the Constitution with effect from the 1st day of June, 2018 to the 30th day of June, 2023 (both days inclusive), FBR added.
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